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Nvidia and other technology companies have benefited from tremendous growth linked to artificial intelligence.
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However, regulations could have a significant impact on their growth prospects.
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Chatbots have been sued for copyright infringement and even in wrongful death cases.
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The growth of artificial intelligence (AI) seems relentless. Tech companies continue to spend feverishly on new products and services, in an effort to stay on top of each other. This growth allowed the chipmaker Nvidia (NASDAQ:NVDA) to become the most valuable company in the world, with a market capitalization of approximately $4.2 trillion today.
The tech giant has been growing its sales and profits at a rapid pace. Its dominance in the AI chip market has attracted the attention of other companies, which are developing their own chips in an effort to be less dependent on Nvidia. But that’s not necessarily the company’s biggest concern. CEO Jensen Huang believes that what could burden not only Nvidia but also the entire sector is regulations, if poorly applied.
One thing that is clear from the growth of AI is the need for strict regulations. Companies that operate popular chatbots face lawsuits for several reasons, including copyright infringement and lack of proper safeguards for users. In rare cases, users contemplating suicide have had questionable interactions with a chatbot. In at least one case, rather than providing a struggling user with advice on how to seek help, ChatGPT was accused of encouraging the user to move forward with the act. And this is not an isolated incident.
The specifics of possible AI regulation are still uncertain. But if regulations become more complicated or vary by state, it could have a significant impact on AI’s growth prospects. “State-to-state regulation of AI would shut down this industry and create a national security issue, because we need to make sure the United States advances AI technology as quickly as possible,” Huang told reporters on Capitol Hill earlier this month after meeting with President Donald Trump. Trump favors establishing a federal standard that would allow for greater clarity and consistency, which Huang says is the right approach. Trump issued an executive order on December 11 that purports to require AI regulations to be instituted on a national level and not on a state-by-state basis. The legality of such an order is likely to be challenged.
Although tech companies like Nvidia would welcome policies that would allow them to continue growing at a rapid pace, it is inevitable that some level of oversight will be put in place. How complicated and restrictive this turns out to be could have a significant impact on the sector’s short- and long-term growth prospects, and it’s an uncertainty that investors buying AI stocks should be aware of.
